Digital rendering of Neom’s line project in Saudi Arabia
Line, Neom
Dubai, United Arab Emirates – Saudi Arabia’s Sovereign Wealth Fund is revaluing its flagship $500 billion future city.
The public investment fund tapped the consulting firm to conduct a strategic review of the feasibility of a 105-mile linear city in Neom, a huge new development in Saudi Arabia.
Neom reviewed the news first reported by Bloomberg and said strategic checks were a “general practice” for long-term megaprojects.
But the move comes amid a global scrutiny of Saudi Arabia’s ambitious infrastructure agenda and growing fiscal pressure.
According to Tim Cullen, a visiting fellow at the Institute of Arab Gulf Countries, Neom did not elaborate on what the review focuses on, but he said it was “highly likely to consider technical feasibility, funding and economic impact.”
“I think these are all areas that people have questioned in the past. Are technology that actually accomplishes what Neom wants to do too much of a development cost?
The line’s location in the northwestern desert of Saudi Arabia is currently a vast construction site filled with cranes and pile drivers, and is a recently built road. The long parallel tracks that include the spine that planners say will be the high-speed rail system.
Construction of Saudi Arabia’s Neom Line Project, October 2024
Giles Pendleton, Neom’s Line
The Saudi Arabian government is designed to become a high-tech city sandwiched between two glass skyscrapers that will ultimately house nine million people.
This project is just one of the ultra-pure venues planned at Neom. It is the brainchild of Saudi Crown Prince Mohammed Bin Salman, an area that the kingdom hopes to bring millions of new residents to Saudi Arabia and revolutionize life and technology within the country.
It is a central pillar of Vision 2030, with the aim of moving the Saudi Arabian economy away from oil revenues and creating new jobs and industries for the burgeoning young population.
Neom’s overall cost is estimated to be $1.5 trillion. After years of unlimited spending, 2024 began to make sudden changes as Saudi Arabia’s budget deficit rose and the prices of barrels of oil fell far below what was needed to balance the kingdom.
“As I said earlier, if the oil price is around $70 per barrel, it’s obviously a very different environment than the average $100 barrel in 2022,” said Karen of the Institute of Arab Gulf Countries. International benchmark Brent crude was trading at $70.15 per barrel at 2:15pm on Friday.
“Many of these projects will have to be re-evaluated and regenerated. Does that mean that neon won’t happen? No, I think Neom will definitely continue in some way. But I think it’s smaller and longer than originally anticipated.”
“Yes Man” mentality
There was also considerable criticism of what some of the kingdom describe as Neom’s “yes” mentality. There, consultants and advisors are said to provide highly optimistic and cost-rebate forecasts to remain in the favor of the employer.
“I don’t think expectations are well managed from a project-level leadership perspective,” Tarik Solomon, honorary chairman of the American Chamber of Commerce in Saudi Arabia, told CNBC.
“To make a project of this size successful, you need to adapt to market reality and build trust.”
Solomon praised Neom and Line as “one of the boldest ideas that have actually been implemented,” but added, “the architecture and consulting companies involved are playing an important role here and should have a more sense of ownership and responsibility.”
In conjunction with the planned line “assessment,” one consultant who works on the project told CNBC, plans to cut jobs across Neom.
“They are finally beginning to make financially sound decisions,” said the consultant who asked them to remain anonymous due to restrictions on speaking to the press.
Neom did not immediately respond to CNBC requests for comments.
